Thursday, February 28, 2013

It's pretty damn obvious what happened in Italy. An unelected neoliberal economist named Mario Monti was installed as her prime minister a year ago to make certain the German banks wouldn't fail. The banksters loved his willingness to impose great suffering on the Italian people. And if they loved him, the bought and paid for economists and their brethren in the corporate press loved him—calling his economic calamities the height of responsible behavior.

Not surprisingly, the victims of EU neoliberalism wanted Monti and his thinking gone! The question is, How do you do this? This is an especially interesting question because the folks suffering this time around are the productive middle classes who don't want a revolution, they just want to be able to live their lives and do their work. So they voted for a professional comedian. Hey, we did it here in Minnesota and while Al Franken isn't exactly Floyd B. Olson, there are actually US Senators who are doing worse jobs.

And this is what the sober Predator Class press around the world is calling an outbreak of "wildcat populism." Mercy me. I believe some of these folks are about to get the vapors. As well they might—after all, if the victims start exacting revenge at anywhere near the levels of their suffering, things could get seriously ugly for the rip-off artists who have presently gained control of the important economic levers.

But you can relax banksters—I have not seen anyone suggest bringing back crucifixions for you thieving vandals...yet. So far, they have only voted for an energetic jester. Get a grip. And oh yeah, straighten up your act before someone thinks of that crucifixion idea.

Death by Davos

Paul Krugman February 26, 2013

This is the way the euro ends: not with the banks but with bunga-bunga.

OK, the euro isn’t doomed — yet. But the Italian election signals that the eurocrats, who never miss an opportunity to miss an opportunity, are getting very close to the edge.

The fundamental fact is that a policy of austerity for all — incredibly harsh austerity in debtor nations, but some austerity in the European core too, and not a hint of expansionary policy anywhere — is a complete failure. None of the nations under Brussels/Berlin-imposed austerity has shown even a hint of economic recovery; unemployment is at society-destroying levels.

This failure came close to destroying the euro twice, in late 2011 and again last summer, as debtor nations threatened to enter a doom loop of plunging bond prices and failing banks. Each time Mario Draghi and the ECB stepped in to contain the damage, first by lending to the banks buying sovereign debt (LTRO) then by announcing a willingness to buy sovereign debt directly (OMT) ; but rather than taking the near-death experience as a warning, Europe’s austerians took the ECB-engineered calming of markets as a sign that austerity was working.

Well, the suffering voters of Europe just told them differently.

How could they not have seen this coming? Well, in Europe even more than in the US the Very Serious People live in a bubble of self-regard at their own seriousness, and imagine that the general public will follow their lead — hey, it’s the only responsible thing to do. Wolfgang Münchau has a great lede in his column today, that gets at the essence:

There was a symbolic moment in the Italian elections when I knew that the game was up for Mario Monti, the defeated prime minister. It was when in the middle of the campaign – in the midst of an anti-establishment insurgence – he took off to Davos to be with his friends from international finance and politics. I know his visit to elite gathering in the Swiss mountains was not an issue in the campaign, but it signalled to me an almost comic lack of political realism.

What Europe’s VSPs fail to get is that the public perception of their right to lead depends on achieving at least some actual results. What they have actually delivered, however, is years of incredible pain accompanied by repeated promises that recovery is just around the corner — and then they wonder that many voters no longer trust their judgment, and turn to someone, anyone, who offers an alternative.

I wish I believed that the Italian election would serve as a wake-up call — a reason to, for example, give the ECB a green light for more expansion, a reason for Germany to do some stimulus and for France to call off its unnecessary belt-tightening. My guess, however, is that we’ll just have more lectures to the Italians and everyone else about how they just aren’t trying hard enough.

And there may be worse figures than Beppe Grillo lurking in Europe’s future. more

Simon Jenkins at the oh-sooo-liberal Guardian. The worst fate he can imagine is a state run by the Producing Classes. And when he hears what they have to say, the only description he has to decribe it is "populism." And throwing out that term is supposed to discredit the legitimate demands of those who do the community's necessary work.

Beppe Grillo's antics may yet shake the whole European system

From Italy to Eastleigh, the economics of self-flagellation have set off a wave of wildcat populism, with unpredictable results

Simon Jenkins The Guardian, 26 February 2013

Oh happy day. The Italian election result is a triumph for democracy. "No pope, no government, no police chief," went yesterday's viral tweet, hailing the arrival in Rome of "punk politics". The outcome is an antidote, not just to Italy's corrupt politics, but to the dogma of austerity that now has Europe's economy by the throat. The only way of loosening its grip is through the ballot. Congratulations, Italy.

The most spectacular victor is Beppe Grillo, a rollicking satirist but with a clear message: that austerity, the euro and corruption are jointly to blame for Italy's continuing ills. We can argue the issues, but why bother when no one listens? Just tell those in charge, as he says, to fuck off. When politicians banned Grillo from TV, he turned to the blog and the piazza. His knockout blow was the ballot.

Grillo's chief victim is the short-lived prime minister, Mario Monti. He was pushed into office by the banks a year ago to impose unlimited suffering on the Italian economy, so as to shore up the euro and thus protect German and other bank loans from devaluation. Darling of the bankers' ramp, he was Super-Mario.

Like Greece and with no local currency to take the strain, the Italian economy had to be waterboarded. It shrank by at least 2.2% last year, with official unemployment at about 10%. Monti promised to hold the Italian economy in its downward spiral, without growth and ever less able to repay its mounting debt. Future generations would be in perpetual bondage to German banks.

Grillo spoke for those generations. His one roughly coherent policy may be a referendum on the euro, but leaving the euro is the key that unlocks the prison door. Even the revival of the outrageous Silvio Berlusconi is good news: his irresponsibility might contribute to pushing Italy into financial crisis and eventual salvation.

For what seems an entire decade, Europe is to be dominated by the "politics of austerity", a gamble with the economy of an entire continent on a par with that of the 1920s. Leaders (and their bankers) claim that austerity is a "necessary" punishment, to be visited on European people for allowing their governments to borrow beyond their means. The policy offers no growth to pay off the debts, and for the eurozone no devaluation to reduce their incidence. The message is forget Keynes and take the medicine, even if it is poison. more

And from the beating heart of Junker Germany, we get the howls of those who know enough history to understand that this is how revolutions begin. Their class is about to lose some power and so we see a fear-mongering headline.

Election Chaos: 'The Whole of Europe Is Afraid of Us'

By Hans-Jürgen Schlamp

An angry comedian and "Bunga Bunga" Berlusconi won enough votes to block the formation of an urgently needed reform-minded government (these folks actually believe this horseshit!) in Rome. They attracted millions of disenchanted people who feel they've lost out from the euro. Italy has descended into chaos and the whole of Europe will feel it.

The party officials debated deep into the night on the popular Italian TV talk show "Porta a Porta" ("Door to Door"). That's their job, after all. The one from the center-right alliance and the one from Silvio Berlusconi's center-right coalition argued about who had won more -- even though both sides lost millions of voters. Mario Monti joined by live videolink to announce that he was actually quite satisfied. This, despite the fact that voters virtually shot his centrist alliance down in flames. It was political waffle, far removed from reality.

Journalists tried to point out the problems to the political professionals. One reporter spoke of a "landslide," while another said the election outcome "calls the whole system into question." But the politicians seemed bent on showing one more time why the voters had deserted them in droves and flocked to a former TV comedian. He, by the way, was already at home and in bed at that late hour. He doesn't go on TV, especially not to talk to politicians and journalists.

Italy's Angry Voters

He's called Beppe Grillo, he's 64 years old and he's the clear winner of the Italian parliamentary election. His "Five-Star Movement" emerged as the biggest single party in the lower house of parliament. The left- and right-wing party grandees -- Pier Luigi Bersani and Silvio Berlusconi -- only managed to muster more votes than him with the help of their respective allied parties. Grillo, who already brought thousands on to the streets in 2007 for his "Kiss My Ass Day," is the mouthpiece of Italy's disenchanted, angry voters. The numbers of these protests voters are growing dramatically.

Incompetent political leadership has been running down the country for years. The state education system is poor, as are the universities and the health system. Most of the state-owned enterprises are hopelessly inefficient. Antique World Heritage Sites like Pompeii are crumbling away. And all the while the members of the political class are enriching themselves and handing out jobs and overpriced contracts to their friends. Some dodgy deal or other is uncovered almost every day. Sometimes someone ends up in jail -- but the system doesn't change. Nothing will change, in fact, unless everything changes. That is Grillo's logic. And many Italians, especially younger ones, agree with him.

[snip]

It's a bleak prospect for Europe.

The overwhelming support given to populists in the election didn't just stem from homemade problems. It was directly linked to Europe. Many Italians -- just like the Greeks, Portuguese and Spaniards -- feel like the losers of monetary union.

Germany and some other northern nations have become richer thanks to the euro but other regions, especially in the south, have become poorer. Their purchasing power has declined, their unemployment has risen and one in three Italians aged 18 and under lives close to the poverty line. And, under an agreement with the European Union, the country is supposed to dedicate 5 percent of its gross domestic product starting in 2015 to reduce its mountain of debt. That might be the right thing to do in macroeconomic terms, but it's an extremely painful policy to impose on ordinary people. They will become poorer each year because they won't be able to generate growth anywhere close to 5 percent. more

And just a short reminder. Pre-revolutionary conditions in Europe are not going to stop Republican (and a LOT of Democrats) from going down the same neoliberal path.

Republicans Can't Pretend Not To See The Austerity Disaster In Europe

Kenneth Thomas, Middle Class Political Economist | Feb. 27, 2013

While we are busy paying attention to the 550th edition of Republican-caused fake crises (aka the sequester), a much more real crisis is brewing in the Eurozone. Richard Field at Trust Your Instincts flags a Reuters report that that Eurozone regulators are strongly considering a proposal to make not just investors in Cyprus banks pay for part of their bailout, but bank depositors as well.

Cyprus is a tax haven, and deposits in the banks there come to some 70 billion euros, more than 3 1/2 times the tiny country's 18 billion euro gross domestic product. One proposal under consideration would be to hold all deposits over 100,000 euros in escrow -- for up to 30 years! Another proposal, says Reuters, would "impose a retroactive tax on all deposits over 100,000 euros..." If either of these options looks like it is close to being approved, it is likely to cause a run on banks in Cyprus.

As Field argues, if one of these plans is established, depositors will likely wonder if it could be applied to other debtor countries like Spain or Italy, causing even more turmoil. (Note: 100,000 euros is the maximum that can be covered by deposit insurance programs similar to the FDIC in the U.S.)

While European leaders seem to want to blunder into a new way of creating a euro crisis, the evidence continues that their preferred austerity policies are failing. The European Commission has announced that the eurozone will remain in recession throughout 2013, according to a separate report by Reuters.

Previously, the Commission had predicted that the recession would end this year. As Paul Krugman shows, the countries that have had the severest austerity have had the largest contractions in their economy.

So, for example, Greece has imposed austerity equal to about 15% of potential GDP, and seen its actual GDP shrink by about 18%.

Despite the clear failure of austerity policies in the eurozone and Great Britain (where 9 months of recession were followed by one quarter of growth but a renewed slump in the last quarter of 2012, and Moody's just downgraded the country's debt), Republicans are still trying to impose budget cuts on the country that we voted against in November. more